Bali Hotels traditionally review their budgets and current occupancy levels before determining how much to increase their rates for the coming year. However, recent global economic events suggest that hoteliers may also need to consider movements in source country exchanges rates against the U.S. Dollar in order to truly understand the impact of price increases and follow-on effect on the market mix of the customers who patronize their properties.
The Role of the U.S. Dollar
Due to specific peculiarities of the Indonesian banking system almost all hotels in Indonesia price and contract their rooms in U.S. dollars. As a result, the ability of tourists from key source markets to afford a Bali holiday is directly linked to both the price of accommodation but also the value of that tourist's home currency against the U.S. dollar.
To illustrate this point, balidiscovery.com presents a table showing the "actual" cost increase in a US$100 hotel room in Bali from October 2007 to October 2008, factoring in both an assumed 25% increase in room tariff and shifts in home currency exchange rates against the U.S. dollar.
Here's what we discovered:
● Australia - The Australian dollar has devalued 28.73% over the past year from October 2007 to October 2008. In fact, if measured against July 15th when the value of the Australian dollar peaked (0.98 AUS$ to US$1.00) the devaluation equals 41.17%.
In practical terms, this means that an Australian who paid AU$111.89 for a US$100 room in October 2007 is now paying 60.91% more or AU$180.05 for that same room. If compared to July 2008 to October 2008 – a span of only 3 months, that Australian traveler will have experienced a 76.46% increase in accommodation costs.
● Japan - The assumed 25% increase in hotel rates by Bali hotels has been softened by a 12.94% appreciation in the Yen over the past 12 months. Thus, Japanese tourists will only pay 8.83% more for their hotel room in October 2008.
● Taiwan - The Taiwanese dollar has remained stabile against the US$, meaning assumed rates have increased 25%.
● South Korea - Over the course of the past twelve months the Won has devalued 31.20% making the assumed 25% hike in the U.S. dollar charge for a room result in an actual increase in cost of 64.01% for those poying in Won.
● Euro - The Euro, too, has devalued against the US dollar, but only by 5.59%. Thus, a 25% hike in room rates means that European visitors are now paying 31.98% more for their room.
● Indonesia - Because the Indonesia domestic visitor is also invariably paying a rate somehow linked to the U.S. dollar, it's worth to noting that the Rupiah has devalued 8.88% over the past year, meaning a 25% increase in room rate will translate into a 36.10% cost increase for Rupiah earners.
On the plus side, however, foreign visitors using dollar-tied currencies will theoretically get an 8.8 % bonus on the Rupiahs they purchase from banks and money changers to purchase local goods, meals and refreshments.
Bali by the Numbers
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